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The Tufts Daily
Where you read it first | Wednesday, April 17, 2024

Electric vehicle and green energy policies have serious financial ramifications

Biden’s green vision squares off against curtailed consumer demand.

EV.heic


U.S. automakers have faced significant challenges in recent months. Meanwhile, consumers still feel squeezed even though inflation and gas prices have gone down in recent months. These factors have disrupted the electric vehicle market where sales have slowed despite price cuts.

Recently, 3,900 U.S. car dealers wrote a letter to President Biden informing him that electric vehicles are “stacking up on [their] lots.” Evidently, Biden’s executive order that 50% of all car sales by 2030 be electric or hybrid cars and the Environmental Protection Agency’s new rule that all cars should have a fuel efficiency of 52 mpg by 2026 are not resonating with consumers, something that reflects general opinion on Biden’s environmental legislation. Polling has shown that much of Biden’s agenda has not gone over well with the American people, as highlighted by his 37.9% approval rating. This letter proves that consumer upset is trickling up to producers, whose bottom lines are suffering.

Automakers are being forced to spend money to maintain inventories of EVs but are losing money because the cars are not selling. According to the Wall Street Journal Editorial Board, “[car] dealers have a 103-day supply of EVs compared to 56 days for all cars.” This makes sense given the poor macroeconomic environment Americans have experienced under the Biden administration. Additionally, most consumers are not inclined to uproot their lives per Biden’s environmental mandate, partly because EVs are still extremely expensive. The WSJ Editorial Board adds that “many apartment renters also don’t have garages for home charging, and public charging networks are spotty with one in four not functional.”

The pain of U.S. automakers should make Biden rethink his political strategy for implementing his green agenda. According to a recent study from the Energy Institute at Haas, between 2012 and 2022, “about half of all EVs went to the 10% most Democratic counties, and about one-third went to the top 5%.” This data indicates that purchasing and using an EV requires a substantial amount of capital and that “it may be harder than previously believed to reach high levels of U.S. EV adoption.” Consumers are turned off by Biden’s approach to the issue of climate change as half of U.S. adults feel that Biden’s energy policy is moving the country in the wrong direction.

The flaws of Biden’s energy policy, though, have bigger impacts than just on automakers. According to a recent study by Richard Tol, a well-known climate economist, “fully delivering on the 1.5-degree Paris promise will cost 4.5% of global GDP each year by midcentury and 5.5% by 2100,” in the words of Bjorn Lomborg, the president of the Copenhagen Consensus. Lomborg believes that Tol’s estimates are generous, noting that “climate policy has been needlessly expensive, with a plethora of inefficient, disconnected measures such as electric-vehicle subsidies.” He adds that “studies show that the policies actually being enacted to curb carbon emissions will cost” more than double Tol’s estimates.

On top of all of this, OPEC+ just agreed to a substantial cut in oil production. This will keep energy prices elevated, putting a long-term strain on all consumers.

Consumers aren’t stupid. They know when the government is shoving an agenda down their throat. They know when politicians don’t listen to their constituents. They know when the government touts unrealistic energy infrastructure goals. Americans are not going to forget when the price of gas reached on average nearly $5 per gallon. While inflation has almost corrected to pre-pandemic levels, Americans are not going to forget that Biden was instrumental in causing it to peak at 9.1% in June 2022. The Biden administration should take note of American consumers and producers who are fed up with EV and green energy mandates and adjust its climate policy accordingly.